The deal, which still requires approval from U.S.
Bankruptcy Judge Burton Lifland, will allow what was once the
world’s largest movie-rental chain to reorganize instead of
having its assets sold off by liquidators. Dish said it expects
to pay approximately $228 million in cash as part of the bid to
acquire the company.

Blockbuster filed for bankruptcy in September with 5,600
stores, including 3,300 in the U.S., saying sales shrank in
recent years while Netflix Inc. (NFLX) grew by renting movies online
and through the mail, and Coinstar Inc. (CSTR) put Redbox DVD vending
machines in supermarkets and drugstores.

“While Blockbuster’s business faces significant
challenges, we look forward to working with its employees to re-
establish Blockbuster’s brand as a leader in video
entertainment,” Tom Cullen, a Dish Network executive vice
president, said today in a statement.

Cullen said Blockbuster’s more than 1,700 store locations,
its recognizable brand and multiple methods of delivery would
complement Dish’s existing video offerings.

The satellite TV provider’s winning bid came shortly after
3 a.m. New York time, according to a person who attended the
bidding and didn’t want to be identified because the results
weren’t yet public. The other bidders were a group of lenders, a
team of two liquidators and the Seoul-based wireless and
Internet-service provider SK Telecom Co.

Eight-Hour Auction

Dish Network, based in Englewood, Colorado, won after an
eight-hour auction in Manhattan bankruptcy court was transferred
to the offices of Icahn’s law firm, Cadwalader, Wickersham &
Taft LLP, at 5:30 p.m. Throughout the day, lawyers and advisers
for Blockbuster took breaks to evaluate the bids, which included
cash components as well as other elements which weren’t easily
comparable.

Michael Freitag, a New York-based spokesman for
Blockbuster, didn’t immediately return a call before normal
business hours.

A $290 million “stalking-horse” offer from Cobalt Video,
a venture between lenders including Monarch Alternative Capital
LP, set the sale procedure and opened the company to competitive
bidding from Cobalt and four other parties. The corporate
liquidators Gordon Brothers Group LLC and Hilco Merchant
Resources LLC also placed bids.

Store Closures

Blockbuster’s Chapter 11 bankruptcy petition listed assets
of $1.02 billion and debt of $1.47 billion. Blockbuster has
2,400 U.S. stores as of this week, with plans to close another
700 by mid-April, spokesman Freitag said previously.

Blockbuster, based in Dallas, had by March 10 resolved
disputes with its largest creditors about the initial contract
with the Cobalt group. Forty-five creditors had initially
objected to Blockbuster’s initial deal, including Walt Disney
Co. (DIS), Universal Studios, Yahoo! Inc., the U.S. Trustee’s office,
landlords and unsecured creditors.

Smaller creditors filed more than 50 objections in the last
two business days leading up to Monday’s auction, protesting the
way Blockbuster intends to transfer old contracts to a new
owner. The company hasn’t shown it or a buyer can pay amounts
still owed under contracts, landlords and business partners
including Microsoft Corp., T-Mobile USA Inc. and Yahoo! said.